UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 2004
( ) Transition report pursuant of Section 13 or 15(d) of the Securities
Exchange Act of 1939 for the transition period ____ to______
COMMISSION FILE NUMBER 000-25973
JOYSTAR, INC.
(Exact name of registrant as specified in its charter)
California 68-0406331
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5 Whatney, Irvine, Ca. 92618, Telephone (949) 837-8101
-------------------------------------------------------------------------------
(Address of Principal Executive Offices, including Registrant's zip code
and telephone number)
Advanced Refrigeration Technologies, Inc.
--------------------------------------------------------------------------------
Former name
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's common stock as of September 30, 2004:
22,403,300 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Balance Sheets 3
(b) Statements of Operations 4
(c) Statement of Shareholders' Equity (deficit) 5
(d) Statements of Cash Flows 6
(e) Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Item 3. Controls and Procedures 9
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults On Senior Securities
Item 4. Submission of Items to a Vote
Item 5. Other Information
Item 6.
(a) Exhibits (b) Reports on Form 8K
SIGNATURES AND CERTIFICATES 11
2
JOYSTAR, INC.
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, 2003 AND SEPTEMBER 30, 2004
----------------------------------------------------------------------------------------------
ASSETS
September 30,
December 31, 2004
2003 (UNAUDITED)
------------ ------------
Current assets:
Cash $ 136,319 $ 107,370
Other receivables 2,000 100
Prepaid expenses 8,042 3,265
------------ ------------
Total current assets 146,361 110,735
------------ ------------
Property and equipment, net 22,690 39,785
------------ ------------
Total assets $ 169,051 $ 150,520
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 132,198 126,110
Accrued salaries and payroll taxes 198,474 293,695
Accrued rent 35,000 35,000
Loans from shareholder 83,795 --
------------ ------------
Total current liabilities 449,467 454,805
------------ ------------
Stockholders' equity (deficit):
Preferred stock (no par value) 10,000,000 shares authorized;
none issued -- --
Common Stock, no par value, 50,000,000 shares authorized;
21,051,277 and 22,403,300 shares issued and outstanding at
December 31, 2003 and September 30, 2004, respectively 1,895,241 3,458,993
Stock issued for deferred compensation (894,250) (712,000)
Stock subscribed not issued, 118,667 and 416,999 shares
at December 31, 2003 and September 30, 2004,
respectively 176,800 623,800
Deficit accumulated during development stage (1,458,207) (3,675,078)
------------ ------------
Total stockholders' (deficit) (280,416) (304,285)
------------ ------------
Total liabilities and stockholders' equity $ 169,051 $ 150,520
============ ============
The accompanying notes are an integral part of these financial statements
3
JOYSTAR, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND FOR THE PERIOD FROM INCEPTION (MAY 23, 2001) TO SEPTEMBER 30, 2004
(UN-AUDITED)
------------------------------------------------------------------------------------------------------------------------
Cumulative
amounts from
For the For the inception
For the nine For the nine three months three months (May 23,
months ended months ended ended ended 2001) to
September 30, September 30, September September September
2004 2003 30, 2004 30, 2003 30, 2004
------------- ------------- ------------- ------------- -------------
Income:
Travel agent programs and
commissions $ 53,610 $ 31,137 $ 43,795 $ 10,204 $ 103,043
------------- ------------- ------------- ------------- -------------
Operating expenses:
General and administrative 1,046,394 444,576 796,246 232,122 1,909,162
Marketing and sales 1,221,502 155,473 552,888 116,413 1,744,788
------------- ------------- ------------- ------------- -------------
Total operating expenses 2,267,896 600,049 1,349,134 348,535 3,653,950
------------- ------------- ------------- ------------- -------------
Loss from operations before interest and
taxes (2,214,286) (568,912) (1,305,339) (338,331) (3,550,907)
Interest expense -- 4,705 -- 4,705 5,644
Provision for taxes - State 2,585 -- 25 -- 2,585
------------- ------------- ------------- ------------- -------------
Net loss $ (2,216,871) $ (573,617) $ (1,305,364) $ (343,036) $ (3,559,136)
============= ============= ============= ============= =============
Loss per share $ (0.10) $ (0.04) $ (0.06) $ (0.02)
============= ============= ============= =============
Weighted average number of common shares
outstanding 21,531,413 15,561,366 22,108,238 18,228,439
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
4
JOYSTAR, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (MAY 23, 2001) TO SEPTEMBER 30, 2004
----------------------------------------------------------------------------------------------------------------------------------
Deficit
COMMON STOCK Stock issued Stock Accumulated Total
--------------------------- for Subscribed During the Stockholders'
Number of Deferred not Development Equity
Shares Amount Compensation Issued Stage (Deficit)
------------ ------------ ------------ ------------ ------------ ------------
Balance at inception - May 23, 2001 -- $ -- $ -- $ -- $ -- $ --
Stock issued for services 16,715,000 16,715 -- -- -- 16,715
Net loss -- -- -- -- (16,715) (16,715)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2001 16,715,000 16,715 -- -- (16,715) --
Stock issued various dates for cash
at $1.50 per share 70,667 105,998 -- -- -- 105,998
Net loss -- -- -- -- (306,673) (306,673)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2002 16,785,667 122,713 -- -- (323,388) (200,675)
Shares canceled by majority
shareholder (3,000,000) -- -- -- -- --
Stock issued various dates
for cash at $1.50 per share 94,932 142,300 -- -- -- 142,300
------------ ------------ ------------ ------------ ------------ ------------
Balance June 11, 2003 date of
acquisition of Joystar, Inc. shares
in a reverse merger 13,880,599 265,013 -- -- (323,388) (58,375)
Cancel Joystar shares (13,880,599) -- -- -- -- --
Advanced Refrigeration shares
outstanding at June 11, 2003 3,322,840 -- -- -- -- --
Issue Advanced Refrigeration
Technologies, Inc. shares 13,880,599 -- -- -- (115,942) (115,942)
Stock issued pursuant to the stock
option plan June 11, 2003 at
market value of stock $0.03 per
share 810,000 24,300 -- -- -- 24,300
Stock issued for services 215,000 15,000 -- -- -- 15,000
Stock issued for past and future
compensation 2,400,000 1,008,000 -- -- -- 1,008,000
Future compensation deferred until earned -- -- (894,250) -- -- (894,250)
Stock issued various dates for cash
at between $0.50 and $1.50 per share 394,267 531,500 -- -- -- 531,500
Stock issued for services 28,571 51,428 -- -- -- 51,428
Stock subscribed not issued 118,667 shares -- -- -- 176,800 -- 176,800
Net loss -- -- -- -- (1,018,877) (1,018,877)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2003 21,051,277 1,895,241 (894,250) 176,800 (1,458,207) (280,416)
Stock issued for services 649,800 788,272 -- -- -- 616,772
Stock issued for cash 702,223 775,480 -- -- -- 946,980
Deferred compensation earned -- -- 204,750 -- -- 204,750
Deferred compensation -- -- (22,500) -- -- (22,500)
Stock subscribed not issued 416,999 shares -- -- -- 447,000 -- 447,000
Net loss -- -- -- -- (2,216,871) (2,216,871)
------------ ------------ ------------ ------------ ------------ ------------
Balance September 30, 2004 (Unaudited) 22,403,300 $ 3,458,993 $ (712,000) $ 623,800 $(3,675,078) $ (304,285)
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
5
JOYSTAR, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND CUMULATIVE FROM INCEPTION (MAY 23, 2001) TO SEPTEMBER 30, 2004
(UN-AUDITED)
-----------------------------------------------------------------------------------------------------
Cumulative
amounts from
inception
For the nine For the nine (May 23, 2001)
Months ended months ended through
September 30, September 30, September 30,
2004 2003 2004
------------ ------------ ------------
Cash flows from operating activities:
Net loss $(2,216,871) $ (573,617) $(3,559,136)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 5,876 1,068 8,484
Stock issued or subscribed for services 1,089,522 116,806 1,310,715
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses 4,777 (3,000) (3,265)
(Increase) decrease in other receivables 1,900 (2,382) (100)
(Decrease) increase in accounts payable (6,088) 24,000 126,110
Increase in accrued salaries and payroll taxes 95,221 115,717 293,695
Increase in rent accrual -- (19,000) 35,000
------------ ------------ ------------
Net cash used in operations (1,025,663) (340,408) (1,788,497)
------------ ------------ ------------
Cash flows used by investing activities:
Acquisition of fixed assets (22,971) (19,979) (48,269)
------------ ------------ ------------
Net cash used by investing activities (22,971) (19,979) (48,269)
------------ ------------ ------------
Cash flows from financing activities:
Issuance of common stock 775,480 142,300 1,555,278
Reduction of shareholders loan, issued
60,000 shares of common stock (83,295) -- (83,295)
Net issuance of common stock for cash 692,185 -- 82,295
(Decrease) Increase in shareholder loans (500) 27,020 --
Subscribed stock not issued 328,000 383,400 504,800
Payment of debt assumed in reverse acquisition -- (70,000) (115,942)
------------ ------------ ------------
Net cash from financing activities 1,019,685 482,720 1,944,136
------------ ------------ ------------
Net (decrease) increase in cash (28,949) 122,333 107,370
Cash, beginning of period 136,319 5,025 --
------------ ------------ ------------
Cash, end of period $ 107,370 $ 127,358 $ 107,370
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance or subscription of common stock
for services $ 1,089,522 $ 29,300 $ 1,310,715
Issuance of common stock for future services $ 22,500 -- $ 712,000
Issuance of common stock for loan payable $ 83,295 -- --
Interest expense paid -- -- 5,644
Income taxes paid $ 2,585 -- $ 2,585
============ ============ ============
The accompanying notes are an integral part of these financial statements
6
JOYSTAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER, 2004 AND 2003
AND CUMULATIVE FROM INCEPTION (MAY 23, 2001) TO SEPTEMBER 30, 2004
(UN-AUDITED)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
On June 11, 2003, Joystar, Inc. (formerly Advanced Refrigeration Technologies,
Inc. a California corporation) (" the Company") acquired all of the issued and
outstanding common stock of Joystar, Inc., a Nevada corporation ("Joystar") in
exchange for the issuance by the Company of a total of 13,880,599 newly issued
restricted shares of common voting stock to the Joystar shareholders pursuant to
the Agreement and Plan of Reorganization dated as of June 10, 2003. Prior to the
issuance of the shares, the Company had 3,322,840 shares of common stock issued
and outstanding. Subsequent to the exchange there were 17,203,439 shares issued
and outstanding. The shareholders of Joystar own 81% of the common stock
outstanding of the Company after the issuance of the 13,880,599 shares.
The acquisition of Joystar by the Company on June 11, 2003 has been accounted
for as a purchase and treated as a reverse acquisition since the former owners
of Joystar controlled 81% of the total shares of Common Stock of the Company
outstanding immediately following the acquisition.
On this basis, the historical financial statements prior to June 11, 2003 have
been restated to be those of the accounting acquirer Joystar. The historical
stockholders' equity prior to the reverse acquisition has been retroactively
restated (a recapitalization) for the equivalent number of shares received in
the acquisition after giving effect to any difference in par value of the
issuer's and acquirer's stock. The original 3,322,840 shares of common stock
outstanding prior to the exchange reorganization have been reflected as an
addition in the stockholders' equity account of the Company on June 11, 2003.
As of June 4, 2004 Joystar, Inc., a Nevada corporation and wholly owned
subsidiary of the Company), was officially merged with and into Joystar, Inc., a
California Corporation (formerly Advanced Refrigeration Technologies, Inc.). In
connection with the merger the Company provided for the name change from
Advanced Refrigeration Technologies, Inc. to Joystar, Inc. The merger and the
name change was approved by the Company's Board of Directors. The Company no
longer files consolidated financial statements. This merger had on effect on
income for this or any prior period reported.
The Company has been in the development stage since its inception May 23, 2001.
2. INTERIM FINANCIAL INFORMATION
-----------------------------
The financial statements of the Company as of September 30, 2004 and for the
nine months ended September 30, 2004 and 2003 and related footnote information
are un-audited. All adjustments (consisting only of normal recurring
adjustments) have been made which, in the opinion of management, are necessary
for a fair presentation. Results of operations for the nine months ended
September 30, 2004 and 2003 are not necessarily indicative of the results that
may be expected for any future period. The balance sheet at December 31, 2003
was derived from audited financial statements.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, have been omitted. These financial statements
should be read in conjunction with the financial statements and notes for the
year ended December 31, 2003
COMMON STOCK TRANSACTIONS
-------------------------
During the nine months ended September 30, 2004, the Company issued 702,223
shares of common stock in a private placement for a total sales price of
$775,480 an average sales price of $1.10 per share. The Company has received
subscriptions to purchase 535,666 shares of common stock at an average purchase
price of $1.16.
During the nine months ended September 30, 2004 the Company issued 649,800
shares of common stock for services valued at the fair market value price of the
Company's stock on the dates issued $788,272 and average of $1.21 a share.
Loans payable to shareholder at December 31, 2003, $83,295 were converted to
60,000 shares of common stock during the nine months ended September 30, 2004.
On August 27, 2004 the Company granted options to purchase 150,000 share of
common stock under the Company's 2003 Equity Compensation Plan at $0.66 per
share, 110% of the market price on that date.
7
LEGAL PROCEEDINGS
----------------
In March, 2004 a former employee of the Company who was terminated prior to the
acquistion of Joystar, filed a lawsuit for breach of contract and specific
performance relating to the exercise of options, among other causes of action.
The Company considers the basis of the lawsuit without merit and intends to
vigorously defend itself.
SUBSEQUENT EVENT
------------------
As of November 8, 2004, the Company commenced its private placement offering of
up to $1,000,000 of units consisting of two shares of common stock and one
warrant to purchase a share of common stock at an exercise price of $1.25 per
share. Each unit is being sold at $2.00 purchase price. The units are offered by
the Company to accredited investors only in reliance on Section 505 of the
Regulation D of the Securities Act of 1933. 100,000 units have been subscribed
as of November 12, 2004.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. PROSPECTIVE SHAREHOLDERS SHOULD
UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD - LOOKING STATEMENT
CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE
FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND
THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE
FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE
TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF
WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD -
LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE
AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL
EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S
RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD - LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH
STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER
PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.
General
Joystar, Inc., a California corporation, formerly Advanced
Refrigeration Technologies, Inc. (the "Company") was incorporated in the State
of California on February 5, 1998. On June 11, 2003, the Company acquired all of
the issued and outstanding common stock of Joystar, Inc., a Nevada corporation
("Joystar") in exchange for the issuance by the Company of a total of 13,880,599
newly issued restricted shares of common voting stock to the Joystar
shareholders pursuant the Agreement an Plan of Reorganization dated as of June
10, 2003. Joystar was incorporated on May 23, 2001. Prior to the issuance of
the shares, the Company had 3,322,840 shares of common stock issued and
outstanding. Subsequent to the exchange there were 17,203,439 shares issued and
outstanding. The shareholders of Joystar own 81% of the common stock outstanding
of the Company after the issuance of the 13,880,598 shares. Concurrent with the
acquisition of Joystar the Company disposed of the fan control business
extinguishing approximately $125,000 of debt for $105,000 of fan control assets.
Joystar is a provider of online and offline travel services for the
leisure and small business traveler. Joystar has been in the development stage
since its inception, May 23, 2001. It is primarily engaged in developing
technology and infrastructure licensing and product development and
acquisitions. The restructuring and re-capitalization has been treated as a
reverse acquisition with Joystar becoming the accounting acquirer. The
accompanying financial statements represent Joystar's activity since inception
May 23, 2001 through June 30, 2003.
As of June 4, 2004 Joystar, Inc., a Nevada corporation was officially
merged with and into Joystar, Inc., a California corporation (formerly Advanced
Refrigeration Technologies, Inc.).
The following discussion should be read in conjunction with selected
financial data and the financial statements and notes to financial statements.
9
RESULTS OF OPERATIONS
---------------------
The Company had sales of $53,610 for the nine months ended September
30, 2004 as compared to $31,137 for the nine months ended September 30, 2003. To
date income has been generated only by travel agent programs and commissions on
travel sales. Sales from inception total $103,043 and the Company is accounted
for as a development stage company. The Company is allocating substantial monies
and effort to enlist travel agents into its travel network in order to increase
income levels to a profitable level. During the quarter ended September 30, 2004
the Company has had more success in signing up agents, generating about $39,000
in revenue from this activity.
(See infomercial in marketing and sales expense)
General and administrative expenses for the nine months ended September
30, 2004 were $1,046,394 as compared to $444,576 for the nine months ended
September 30, 2003, an increase of $601,818 due primarily to the increases in
salaries of $399,000, professional fees of $123,000, rent $27,000, travel and
entertainment of $41,000 and a general increase in other expenses due to
increased activity.
Marketing and sales expenses for the nine months ended September 30,
2004 were $1,221,502 as compared to $155,473 for the nine months ended September
30, 2003, an increase of $1,066,029. This was due to increases in independent
contractor marketing expenses $418,000 and sales and marketing expense $650,000
including production of an infomercial. The Company is expecting the infomercial
to generate substantial interest by agents to join the Company. However, there
can be no assurance of the realization of such expectations by the Company.
LIQUIDITY AND SOURCES OF CAPITAL
---------------------------------
At September 30, 2004 the Company had a cash balance of $107,370 as
compared to a cash balance of $136,319 at December 31, 2003.
Loans payable to shareholder at December 31, 2003, $83,295 were
converted to 60,000 shares of common stock during the nine months ended
September 30, 2004.
The Company had negative working capital at September 30, 2004. To date
the Company has financed operations by issuance of shares of common stock in
private placements $1,555,278, stock subscribed for cash of $504,800 and the
issuance of shares for services $1,310,715.
During the nine months ended September 30, 2004, the Company issued
702,223 shares of common stock in a private placement for a total purchase price
of $775,480 an average purchase price of $1.10 per share. The Company has
received subscriptions to purchase 535,666 shares of common stock at an average
purchase price of $1.16.
During the nine months ended September 30, 2004 the Company issued
649,800 shares of common stock for services valued at the fair market value
price of the Company's stock on the dates issued $788,272 and average of $1.21 a
share.
ITEM 3. Controls and Procedures
Our President and Treasurer/Chief Financial Officer (the "Certifying
Officer") is responsible for establishing and maintaining disclosure controls
and procedures and internal controls and procedures for financial reporting for
the Company. The Certifying Officer has designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information is made known to him, particularly during the
period in which this report was prepared. The Certifying Officer has evaluated
the effectiveness of the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting as of September 30,
2004 and believes that the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting are effective based on
the required evaluation. There have been no significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
10
PART II. OTHER INFORMATION
Item 1. Legal proceedings
In March, 2004 a former employee of the Company who was terminated prior to the
acquisition of Joystar, filed a lawsuit in Orange County Superior Court for
breach of contract and specific performance relating to the exercise of options,
among other causes of action. The amount of damages is not specified in the
complaint. Damages may vary depending on number of options allegedly exercises,
the value of shares over the period of time they might have been exercised and
other factors. The Company considers the basis of the lawsuit without merit and
intends to vigorously defend itself.
Item 2. Changes in securities and use of proceeds
During the nine months ended September 30, 2004, the Company issued 702,223
shares of common stock in a private placement for a total purchase price of
$775,480 an average purchase price of $1.10 per share. The Company has received
subscriptions to purchase 535,666 shares of common stock at an average purchase
price of $1.16. The shares of the Company's common stock were issued and sold in
reliance upon the exemption provided by Section 4(2) and Section 506 of
Regulation D of the Securities Act of 1933. The offers and sales in the
Company's private placement were made to accredited investors only. The proceeds
were used for working capital.
During the nine months ended September 30, 2004 the Company issued 649,800
shares of common stock for services valued at the fair market value price of the
Company's stock on the dates issued $788,272 an average of $1.21 a share.
Item 3. Defaults on senior securities NONE
Item 4. Submission of items to a vote NONE
Item 5. Other information NONE
Item 6.
(a) Exhibits
--------
Exhibit No. Description
----------- -----------
Exhibit 31 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT
Exhibit 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT
b) Reports on 8K during the quarter: none
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JOYSTAR, INC.
Date: November 15, 2004
By /s/ William Alverson
---------------------------
President
12